Gold Breaks $1100 As Dollar Falls
By Colin Twiggs
November 9, 2009 10:00 p.m. ET (2:00 p.m. AET)
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US Dollar Index
The US Dollar Index is testing support at 75. Breakout would signal a decline to 74*. In the long term, the dollar is headed for its 2008 low of 71. Breakout above 76.50 is unlikely, but would warn that the down-trend is ending.
* Target calculation: 75 - ( 76 - 75 ) = 74
Gold
Spot gold reached its short-term target of $1100*. Expect retracement to test the new support level at $1070. The long-term target for the primary advance is $1300*. Reversal below the rising trendline is most unlikely, but would warn of trend weakness.
* Target calculations: 1000 + ( 1000 - 900 ) = 1100 and 1000 + ( 1000 - 700 ) = 1300
Gold miners are lagging rather than leading the spot metal price. The Market Vectors Gold Miners Index [GDX] formed a broadening wedge continuation pattern. Breakout above the upper channel would offer a target of $58*.
* Target calculation: 50 + ( 50 - 42 ) = 58
Silver
Spot silver also displays a broadening wedge (right-angled ascending) continuation pattern. Breakout above the upper trend channel would offer a target of the March 2008 high of $21*. Respect of resistance at $18 is unlikely, but would warn of correction to the lower trend channel.
* Target calculation: 18.50 + ( 18.50 - 16 ) = 21
Platinum
Platinum is edging cautiously upward. Breakout above $1360 would offer a target of $1420*. Reversal below the lower trend channel remains unlikely, but would warn that the primary up-trend is weakening.
* Target calculations: 1360 + ( 1360 - 1300 ) = 1420
Crude Oil
Crude oil is also edging up cautiously. Narrow consolidation is a bullish sign and breakout above $80 would signal an advance to $84*. Reversal below $76, however, would test the rising trendline at $72. In the long term, the next resistance level is at $90, while failure of primary support at $66 would signal a trend reversal.
* Target calculation: 80 + ( 80 - 76 ) = 84
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Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.